Make no mistake, this week’s stock market circus is about easy money. 

Pump and dump schemes have been around since the beginning of public markets. This one is no different: an unsuspecting stock as the vehicle for market manipulation and gain. Forums on the internet have truly magnified this one.

Bubbles are growing bigger. Herd mentality is fiercer. Crashes are sharper. Does this feel any different than some of the runups Bitcoin had?

A lot is being made of Gamestop stock price. The word “unprecedented” was worn out by Tuesday, and with good reason: Gamestop is now worth more than Best Buy.

I’ll briefly recap what’s happening:  

Someone on the online public forum Reddit in late 2019 identified that the Gamestop stock had people betting against its price significantly: The stock was 150% “sold short” and that presented an opportunity. If enough people bid the stock price up, the short seller (who borrowed shares to sell) would be forced to buy shares to repay his lender and cover his bet. This would create substantial upwards price movement for current stockholders. Remember, when there are more buyers than sellers, the price goes up. This, of course, reeked of opportunity.

2020 was difficult for all companies, Gamestop’s stores were no exception: The original Reddit poster described the earnings reports as “watching Chernobyl unfold”. AMC, Express, Koss, and Blackberry (yes, still around) became targets of the online community as well with their low stock prices and high short interest. Over the last two weeks, the idea took off and trade volume exploded.

Make no mistake, these businesses are not doing well. The stock is simply a pawn in a game.

Every great underdog story eventually gets greenlit for a Disney movie only after the unpredictable team wins the last game. Uncertain real-time stories of luck, timing, daily anxiety get replaced in the script by tales of grit and destiny. These stock price runups have seen numerous headline rewrites to match the price action. Senators, celebrities, and billionaires on CNBC wear white hats celebrating this Disney-esque “win for the little guy”. Sounds nice, but that skips the get-rich-quick part.

Will every new “investor” in these shares sell today and take profits? I doubt it. The heart of every pump and dump scheme is always greed. There have been thousands of new “investors” at nosebleed levels who have fear of missing out (FOMO) on their chance to make a quick buck. These newer traders are the most likely to end up as the bagholders, as they anchor towards their cost basis believing they too are entitled to a 10x return.

But remember, nobody rings a bell at the top.

 The internet has increased the speed of communication, so we can clearly expect markets to move faster and to bigger extremes. Bubbles will get bigger. One thing is certain though: Every melt-up is usually followed by a melt-down. It’s going to be breathtaking when people rush for the exits and realize the pump is over and the dump has begun.